Microfinancing Pakistan’s Women Entrepreneurs: A Chance for Jobs and a Better Life

Fifty-eight-year-old widow Arza Parveen wasted no time building a life of resilience and independence after her husband was injured in war. Her family was left without financial support. With a microfinance loan from Pakistan’s Kashf Foundation, Arza established a neighborhood kiryana, or a small general store selling groceries and sundries. She now earns a steady monthly income.

“I had many difficulties because my husband was injured in war, and I had no money,” says Arza. “I want to give this message to all women that if you want to move forward, then contact Kashf, take a loan, and move forward like I am doing. If money comes, the country will develop.”

For widows like Azra, the microfinance loan served as a lifeline. She is one of 5.6 million women in the country who leverage microfinancing to succeed in business and life.

Arza’s story is echoed by Anila Naz, a hairdresser from Islamabad. For Anila, a microfinance loan from HBL Microfinance Bank provided the opportunity her life needed. “I was a zero, and now I’m a hero,” says Anila, who owned a thriving beauty salon in Islamabad until the COVID-19 pandemic disrupted her operations. The microfinance loan has helped her expand her business.

Anila urges other women: “Our daughters and women should take a loan and advance their skills.”

Microfinance—providing small loans ($10-$2000) to the poorest—is a significant sector in Pakistan, serving 76 percent of individual borrowers and over 11 percent of outstanding agricultural advances.

However, 37.2 percent of Pakistan's population lives in poverty, and the country has a significant number of unbanked citizens. Only 21 percent of adults have bank accounts; dropping to just 13 percent for women and rural populations. Recent macroeconomic instability, exacerbated by the devastating 2022 floods, has increased fiscal demands and reduced lending to small and medium-sized enterprises (SMEs), such as those owned by Anila and Arza,  to just 5.2 percent of domestic private lending credit.

Microfinance as an Agent of Inclusive Growth

Microfinance empowers vulnerable citizens like Anila and Arza by providing access to financial services that foster business growth and ultimately help reduce household poverty. It enhances women's economic participation and independence, driving national growth. The Kashf Foundation’s latest impact assessment revealed that repeat borrowing reduced poverty in at least 40 percent of client households in Pakistan, while 90 percent of women reported increased business income.

Recognizing its transformative power, the World Bank Group (WBG) has supported Pakistan's microfinance sector since 2000. In 2002, the World Bank established the Pakistan Poverty Alleviation Fund, and the International Finance Corporation (IFC) supported the launch of Pakistan’s first private microfinance institution, HBL Microfinance Bank. The WBG has also backed the 2015 Pakistan National Financial Inclusion Strategy.

More recently, in March 2025, the World Bank launched the $102 million Resilient and Accessible Microfinance (RAM) Project, co-financed by a grant from the Global Shield Financing Facility. RAM supports the resilience of the microfinance sector, particularly against climate-related shocks like the 2022 floods, which severely impacted the agriculture sector, a key borrower base. RAM is expected to benefit nearly 1.89 million people, including over 1 million women and 350,000 youth.

RAM builds on the Pakistan Financial Inclusion and Infrastructure Project, which provided financing to 650,000 unique women borrowers over seven years (almost 7 percent of total micro-borrowers), including 110,000 women in flood-affected areas.

Ayesha Bibi, a 30-year-old seamstress, exemplifies the success of women borrowers. She expanded her trading business with six microfinance loans, earning a monthly income of PKR 17,500. She plans to add fabric sales to grow her enterprise.

“My idea is to take out a loan and expand the shop so I can sell fabric and stitch clothes simultaneously,” Ayesha explains.

A Skeptical and Optimistic Outlook

Despite its significance for Pakistan, the microfinance sector has only tapped into a quarter of its potential market size. Out of an estimated market of 40.9 million, only 9.3 million are active borrowers, with an even smaller proportion being women borrowers.

Furthermore, over the last decade, the conventional microfinance sector has increasingly distanced itself from rural loans and shifted towards urban nano-lending, offering smaller loans under PKR 25,000, often accessed digitally. This transition has detracted from one of microfinancing's original goals: empowering women, as women in Pakistan typically have a low digital footprint in the finance sector and miss the opportunity to borrow these nano loans. Only 18 percent of adult women in Pakistan have active bank accounts compared to 51 percent of men, and only 50 percent of women own mobile phones compared to 81 percent of men.

“Microfinance has been a fundamental catalyst for financial inclusion,” explains Fahad Hasan, Team Leader of the Pakistan Financial Inclusion and Infrastructure Project. “However, the sector has faced external shocks. While digital finance has potential, there’s a risk of shifting away from rural productive loans, missing an opportunity to empower women.”

Despite challenges, microfinance has integrated underserved communities into Pakistan’s financial services landscape. The stories of women such as Anila, Arza, and Ayesha demonstrate microfinancing’s ability to empower women and transform their lives and mindsets. This stands as a significant achievement in its own right.

“Research shows that when women earn, they are not only better positioned to advocate for themselves, but also for their children’s health, education, and the overall well-being of their families,” explains Roshaneh Zafar, CEO and founder of Kashf Foundation, which gives 100 percent of its loans to female-led businesses. “Microfinance acts as a vital enabler in this process—it empowers women to reclaim agency, strengthens household resilience, and lays the foundation for more inclusive, equitable communities across Pakistan.”

Pakistan’s microfinance sector is still developing, but it could be vital to unlocking the country’s potential, one woman at a time.